This blog looks at promoting investment and business in Fiji and is targeted at foreign investors as well as Fiji residents and former residents working abroad. We also post information and critique developments relating to the financial sector in Fiji.

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Thursday, May 14, 2009

Will customers pay higher bank fees under new RBF policy?

The Reserve Bank of Fiji had announced around mid April 2009 that it was capping banks and financial institutions weighted average lending rates to the level at which those rates were for each financial institution at end December 2008.

It also announced that it was placing a ceiling on the interest spreads of the same institutions to a limit of 4%. Read our earlier post on the Reserve Bank of Fiji's new policy here.

What does that mean?

While banks and financial institutions struggle with the new requirements, from which customers should greatly benefit from, particularly when interest spreads with some banks might be around 8% or so, this would mean that banks will desperately look at either increasing revenue from other non-traditional sources, such as fees and commissions, or cutting down their overheads, including closing branches and sending some of their staff home.

Banks and financial institutions might now all be looking at ways to increase their non-interest income, through raising of fees, charging of new fees, etc. It is interesting to note that the Reserve Bank's policy announcement in April 2009, did not mention anything on controlling non-interest income, particularly fees income and commissions, of banks and financial institutions.

So, customers? Expect some increase in your bank charges over the next few months.

As for overheads, banks and financial institutions would be all out to reduce their overheads as a direct result of the new banking and financial institutions requirements. This would see the cutting down of some services in some areas, closing of certain non-profitable branches and agencies, and termination of staff.